Sensex and Nifty, the two equity benchmarks, failed to hold on to early gains and closed in the red for the seventh straight session on Thursday. The investors are now in wait-and-watch mode ahead of the RBI's interest rate decision scheduled for Friday. According to traders, unabated selling by foreign funds added to the pressure, though a modest recovery in the rupee cushioned the fall.
After rallying in early trade, the 30-share BSE Sensex came under in the afternoon session and closed 188 points (0.33 per cent) lower at 56,409, while the broader NSE Nifty dipped 40 points (0.24 per cent) to end at 16,818.
On the 30-share Sensex platform, Asian Paints was the biggest laggard, tumbling 5.22 per cent, followed by Tech Mahindra, Titan, Kotak Mahindra Bank, Bajaj Finance, TCS, Wipro, and Bajaj Finserv. On the flip side, ITC, Dr Reddy's, Tata Steel, Sun Pharma, Nestle India, M&M, and NTPC were among the major winners.
The Reserve Bank of India (RBI) may take cues from its global counterparts, including the US Federal Reserve, to raise interest rate for the fourth time in a row on Friday to tame stubborn inflation. The RBI, which has since May raised the short-term lending rate (repo) by 140 basis points (bps), may again go for a 50-bps increase to take it to a three-year high of 5.9 per cent, say experts.
"The initial uptick in the domestic market was short-lived due to its weak global peers and declining rupee. As the yield differential between India and the US fell to a multi-year low of 348 bps, foreign investors are still departing from the Indian market. Amid the ongoing global trend of aggressive rate hikes, markets are braced for a 50 bps increase by RBI. Investors eagerly await the central bank's intervention to aid bank liquidity, curb currency depreciation, and provide updates on its monetary stance and GDP outlook," said Vinod Nair, Head of Research at Geojit Financial Services.
In the broader market, the BSE Smallcap gauge climbed 0.63 per cent and the Midcap index rose 0.31 per cent.
Among the BSE sectoral indices, utilities fell by 1.38 per cent, followed by power (1.30 per cent), IT (0.60 per cent), consumer discretionary (0.47 per cent), teck (0.34 per cent) and financial services (0.33 per cent).
Healthcare, FMCG, realty, commodities and industrials ended higher.
World stocks were largely negative amid fears of the global economy slipping into recession. Elsewhere in Asia, Shanghai and Hong Kong closed in the red, while markets in Seoul and Tokyo ended higher.
Stock exchanges in Europe were trading lower in mid-session deals. The US markets had bounced back on Wednesday and ended with gains.
Meanwhile, the international oil benchmark Brent crude dipped 0.45 per cent to $88.92 per barrel.
The rupee consolidated in a narrow range and settled 13 paise higher at 81.80 against US dollar on Thursday.
Foreign institutional investors offloaded shares worth Rs 2,772.49 crore on Wednesday, according to data available with the BSE.